Viability of project questioned after review of nonprofit’s finances

ENCINITAS — Several roadblocks have become evident in the EUSD (Encinitas Union School Board) agreement to sell the Pacific View Elementary site.

Three groups out of 15 original proposals were selected to make their pitch to the trustees during a special meeting in February of this year.

San Diego-based nonprofit Art Pulse was chosen with a 4-1 vote in mid-February in part because the group plans to purchase the site for $7.5 million and has some funds on hand, according to trustees.

“As a school board, we have to be fiscal stewards of the district and protect our kids and their education,” EUSD Board President Emily Andrade said at the February meeting.

Envision the View and the Sanderling Waldorf School were also in the running. Both offered to lease the 2.8-acre oceanfront parcel.

Trustee Maureen Muir supported Envision the View’s plan to lease the land and turn the site into a community center. She has expressed reservations about Art Pulse’s ability to come up with the cost of the property.

Art Pulse Executive Director April Game said the organization partnered with local developer John DeWald who will pay the $300,000 deposit to enter into escrow.

He has also agreed to pay $3 million of the total purchase price of $7.5 million.

In return, Game said DeWald would own part of the land in order to develop single-family homes.

Art Pulse will only have to come up with $4 million plus the construction costs. She estimates the cost of arts center construction, including permits to range from $5 million to $12 million.

Game said DeWald has agreed to relinquish his ownership stake should the group be able to pay him back in full before escrow closes. “If we had a private donor or an arts group that wanted to donate, we could pay him,” Game said in a recent interview.

According to the organization’s tax returns, it took in just over $98,000 in 2010 and has run at a deficit since 2008. Game said a large loan given to the organization by one of its board members was going to be partially forgiven.

In 2009, tax documents show a loan of $92,684 was given to the group by Henry Moon. Moon was listed as a board member on the San Diego Fine Arts Society. The Society’s website, sdfas.org, redirects viewers to the Art Pulse website.

That year, the group reported gross annual revenue of $65,348, with assets of just $369.

In 2010 tax documents, two loans are listed for as “Operational Support.” Game loaned the group $236, while Moon loaned $664,010. The organizations that year were noted as $113,683, with $369 in assets.

Pat Libby, a nationally recognized expert in the field of nonprofit governance issues and the Director of the University of San Diego’s Institute of Nonprofit Education and Research said she thought the relationship between the school board and the group sounded “odd.”

“It’s very unusual especially given the apparent lack of fundraising expertise and operating viability of the group that it was awarded the bid,” she said.

While it’s not unusual for nonprofits to expand programming within the stated purpose of the organization, Libby said Art Pulse doesn’t have a “proven track record” in operating an arts center.

Game plans to involve the community in various planning meetings and initiate a capital fundraising campaign.

She has reiterated at various public meetings that the group has enlisted the help of a professional fundraiser and that she is confident the money will be raised.

However, no alternate plan has been disclosed should the group fail to meet its capital campaign goals.

Located on Third Street between E Street and F Street, the former school campus is surrounded by commercial buildings and smaller homes, with a few exceptions.

The school closed due to declining enrollment in the area in 2003.

The property was gifted to the city in 1883 for a school site. The original schoolhouse is located to the west of the property and houses the Encinitas Historical Society.

While several proposals have been tossed around regarding the future of the site, none have been met with success. In 2005, an advisory committee was created consisting of various stakeholders.

An initial proposal to build a medical complex with office space and condos was met with disapproval by the downtown community.

The school board sued the city after the City Council refused to rezone the property from semi-public to residential last year.

EUSD Superintendent Timothy Baird said in a previous interview that the board would drop the suit if negotiations with Art Pulse were successful.

However, he has since added a caveat to the promise. Baird said the school district sent the City Council a letter Sept. 26, promising to extend the tolling agreement the district has with the city should it decide to begin the rezoning process.

“I was a little surprised the council did not even start what is a lengthy process, especially given the letter they received from us,” Baird said in a recent interview.

The tolling agreement effectively puts the lawsuit on hold. “We (the district) have no desire to have a long protracted litigation against the city,” Baird said.

The board of trustees is scheduled to discuss the matter and provide direction at a special meeting Oct. 4.